Competitiveness Pact signed covering 86.5 per cent of employees

The Competitiveness Pact was finally signed on the evening of 14 June. Most of the Finnish unions endorsed the Pact and it now covers 86.5 per cent of Finnish wage and salary earners.

The national labour market pact or the so called Competitiveness Pact has been perhaps the main issue in Finnish politics for more than a year. The Government was determined to cut costs for employers and forced trade unions to accept a deal that makes everyone work 24 hours more a year for the existing rates of pay.

The Pact also includes further weakening of established working arrangements and benefits, like slicing 30 per cent off the holiday bonus for those working in the public sector. There will be no pay rises for one year.

Had the unions not acceped the agreement that was reached in the negotiations the Government was prepared to push ahead with hard austerity measures.

To accept the pact was like choosing between a pest and cholera, according to STTK confederation economist Ralf Sund. It was not easy for trade unions to weaken the status of wage and salary earners, but the alternative would have been even more fatal, Sund says.

In the end most Finnish unions decided to back the Pact. The Government helped by offering a sweetner – promising to cut income tax and thus increase purchasing power if the Pact were to be accepted.

The promise included tax cuts of 515 million euro should the Pact cover more than 90 per cent of wage and salary earners. If the Pact were to include 85 – 90 per cent of employees, the tax cut would be 415 million euro.

Prime Minister Juha Sipilä announced that right now the coverage stands at 86.52 per cent. Some collective bargaining is still open, and it might be possible that the coverage will still climb to over 90 per cent.

PM Sipilä is giving two more months for the still open collective bargaining negotiations to embrace the Pact. Only then will the Government make a final decision on the income tax cut.